Stock Market Set-up 28th August #Nifty

Penultimate day to the expiry and we are now safely in the 11000-11200 band that the options charts are showing and in all probability we will have expiry in this band tomorrow and now we are at the middle of the range at 11105. Last 3 trading sessions Nifty recovered nearly 500 points and now the speed is receding. The FPI tax effect has gone and the market is looking at the things around and globally there are some worrying trends. The yield curve again has reversed in the US and the spread reached 5 bps which is the highest since 2007.

So, the recession fears are again back and Dow lost 120 points. The Asian markets are also in a mixed zone with Hong Kong down 50 points while Japan is up 30 points. Brent Crude is touching 60 dollars again and the news of fall in US oil reserves.

On the domestic front, there are some domestic triggers that would market today and the most important is the cabinet committee meeting today evening which will ease FDI norms for many sectors and the major is going to be animation and multimedia and contract manufacturing. This would be seen as a positive but it will come only after market hours. Technically the market is now sandwiched between the 20 and 200dma and good fundamental news only can take it above 11200 which is the 200dma.

Today’s FDI news might serve as a trigger. On the flip side, the worries on growth, NPAs, sluggish auto sales will continue to worry market. So, we might cross this 11200 barrier tomorrow or on Friday, but if things don’t go fine and we get a bad GDP number on Friday then 11000 will be in danger on the downside.

On the derivatives front, for the first time in weeks genuine buying seems to have come in Nifty futures by FIIs and we have seen 747 Cr buying yesterday and that took the Nifty futures long positions from 30% to 33% and we also have the Nifty Futures rollovers for September series at 34% as on yesterday. All these are positives in the near term. Options wise, however, the trade is on the neutral side with Put call ratio jumping marginally to 1.23 from 1.21.

11000 put added 8.8 lakh contracts and 11100 put added 5.8 lakh contracts and 11000 put is miles ahead of other strikes as the put with highest open interest. On the call side, 11300 call added 6.7 lakh positions and 11200 call added 4.7 lakh contracts and 11200 has the highest open interest on call side followed by 11300 call.

What is the Nifty trade for the day?

Unlike the last two trading sessions where we had a gap up opening, today we are likely to open flat around 11100-11120 levels and we have resistance coming at 11150 zone first and 11180-11200 zone next. On the downside, support will come at 11080 levels and at 11020-11050 levels. So, it’s going to be a range-bound market today, but we can expect something big happening in the afternoon session on the expiry factor plus FDI announcement news leaks.

So, the trade for the day is to go long if 11100 mark holds and Nifty stays above that. You can take this trade in the afternoon and take it to tomorrow also if you want. The target for this trade can be 11180-11200 mark and if you get it today, you can book profit and exit. There can be a mini 3 PM move that is expected on the upside today if the news is positive.